Dealer Recovery Trust Fund closer to passage as lawmakers near term end

May 27, 2011

Legislation to create a Dealer Recovery Trust Fund inched forward in Springfield, as the Illinois General Assembly approached a scheduled May 31 deadline to adjourn the lawmakers’ spring session.

The fund, which would help people harmed by dealerships that close without settling liens on trade-ins, would be endowed by adding $500 to the price of an annual license for new- and used-vehicle dealers and motorcycle dealers.

The Senate passed House Bill 880 on May 17, but added an amendment that the House still was considering at this newsletter’s deadline.

Among the Senate changes, a dealer who sells 25 or fewer vehicles a year would be exempt from the $500 fund surcharge. The Senate also tinkered with the makeup of the proposed Dealer Recovery Trust Fund Board, which would oversee the fund. The House structured the three-person board to be comprised of the Illinois attorney general and secretary of state, or their delegates; and someone to represent “Illinois automobile dealers.” The Senate said that representative should alternately come from the ranks of franchised and independent dealers.

The attorney general’s office sought to create the Dealer Recovery Trust Fund after talking to consumers who said they were harmed by the unpaid liens. Assistant Illinois Attorney General Greg Grzeskiewicz described consumers who subsequently saw their credit scores damaged while they were saddled with two vehicle loan payments. Grzeskiewicz said Illinois is the only state without a recovery fund or a bonding mechanism to help those consumers.

The CATA and the IADA, involved in shaping the legislation, were able to steer endowment of the fund toward a hike in dealer licenses and away from more costly surety bonds. They also managed to widen the circle of those who could be compensated by the fund to include dealers, who similarly can be harmed by unpaid liens on dealer trades.